1. Do Now In a few sentences, describe the barter system. What are its advantages and disadvantages? If you had to function within a barter system, what would you produce to trade, and why?

2. Banking Today

3. Measuring Money Supply Currency – the bills and coins we carry to pay for things – is money. What else is considered currency???? The Money Supply: all the money available in the US economy

4. Measuring Money Supply M1 – represents money that people can gain access to easily and immediately to pay for goods and services –These assets are said to be LIQUID – able to be used as or easily changed to cash –Made up of all currency held outside of bank vaults, demand deposits ($ in checking accounts), and traveler’s checks

5. Measuring Money Supply M2 consists of all the assets in M1, plus several additional assets that cannot be used as cash directly, but can be converted to cash fairly easily (called near money) Includes savings accounts and money market mutual funds (funds that pools money from small savers to purchase short-term government and corporate securities)

6. Functions of Financial Institutions 1. Storing Money – a safe, convenient place to store money

7. Functions of Financial Institutions 2. Saving Money: banks offer a variety of ways for people to save money – savings accounts, checking accounts, money market accounts, and certificates of deposit (CDs)

8. Functions of Financial Institutions 3. Loans: by making loans, banks help new businesses get started, and they help established businesses grow. Banks make money from the interest they charge on loans – unless the borrower defaults, or fails to pay back their loan

9. Functions of Financial Institutions 4. Mortgages: a specific type of loan that is used to buy real estate

10. Functions of Financial Institutions 5. Credit Cards: a card entitling its owner to buy goods and services based on the owner’s promise to pay for those goods and services

11. Types of Financial Institutions Commercial banks Savings and Loan Associations Savings banks Credit Unions Finance companies

12. Types of Financial Institutions Electronic banking –ATM –Debit cards –Home banking –Automated clearing house –Stored-value cards